India's food is rotting. The greatest harvest of foodgrains in the country's history is beginning to waste away in storage, eaten by rodents and insects, spoiled by moisture. Some of it, for want of storage space, is sitting in the open, exposed to the late monsoon rains.
Estimated losses of foodgrains, according to the Ministry of Food and Civil Supplies, are about 10 per cent of the total production, or 20 million tonnes a year, about as much as what Australia produces. Most of these losses take place in storage, in the vast godowns of the Food Corporation of India, which are, according to Rohit Saran in India Today, better protected than the nation's borders: the public is forbidden entry. Transparency has never been a characteristic of India's bureaucracy, least of all the FCI. And, while farmers have not done badly at producing food, the bureaucracy of the FCI seems clearly to be failing in its storage.
The situation regarding distribution seems even worse. The Public Distribution System has always had its justification in terms of providing "food security", but a 1994 survey of rural households carried out by the National Council of Applied Economic Research reveals some disturbing facts. About 40 per cent of the PDS offtake is in the cities. Less than a third of the rural households, in 1994, used the PDS, and these got less than a fourth of their requirement of foodgrains from it (the exact figures are 33.2 per cent and 23.5 per cent). Dalits and adivasis have been in a slightly different position here: fewer SCs and a little more STs use the PDS as compared to "other Hindu" households. Landless wage earners use more than their share (44.3 per cent of such households use the PDS) but even these get only 25.8 per cent of their grain requirements from the system.
Rather more shocking are the results gotten when the NCAER divides its respondents into "poverty groups". Here we find that the poorer households actually use the PDS less than households above the poverty line! Specifically, 30 per cent of the households in the "lower segment below the poverty line," 29.5 per cent of the "upper segment below the poverty line," 37.1 per cent of the "lower segment above the poverty line" and 30.6 per cent of the "upper segment above the poverty line" use the PDS. Not exactly what one would call good "targeting"!
The greatest inequalities, however, are geographical. In the poorest States, such as Bihar, Uttar Pradesh and Orissa, only 5.0, 5.2 and 5.2 per cent households use the PDS. The greatest coverage of the system is in the southern States, where up to 78 per cent of rural households in Kerala and 82 per cent in Tamil Nadu use the PDS. It is somewhat questionable whether the overall effect really helps consumption: Tamil Nadu and Kerala both have lower than average per capita consumption of foodgrains.
It is clearly time to consider restructuring the PDS. Its costs keep rising year by year; the amount of foodgrains stored goes beyond all rational limits, and waste is increasing. Dr. Kirit Parikh, director of the Indira Gandhi Institute for Development Research, and a long-time expert on PDS and food security, has noted that only about 12 paise of every rupee spent on PDS actually reaches the poor in the form of food; the rest goes to wastage and bureaucratic expenses. According to Dr. Parikh, the optimum level of foodstocks held by the Government would be about 4 million tonnes for rice and half a million for wheat; instead, the FCI is now holding 19.8 million tonnes of wheat and 11.7 million tonnes of rice. The cost of this immense storage in outdated godowns comes to about Rs. 16,000 crores a year; such funds, invested, would yield about twice the Government's entire food bill.
This does not mean there is no role for the Government in the shortage and distribution of foodgrains. It does not mean that the poor should simply be left to the mercy of the market. But the system needs to be drastically modernised. The Nobel laureate, Dr. Amartya Sen, has been arguing for the combination of democratic state action and market; noting that there are some things that the Government should do - take responsibility for education, health and welfare - and some things it should not do. Running airplanes, hotels and businesses generally fall in the latter category. It also seems that taking charge of storing and distributing foodgrains has been something that the Government does not do very well.
Just as agriculture needs technological modernisation, food distribution and storage need to be updated. Here, a combination of public and private has to be considered. Private traders are not necessarily more efficient than the Government - there is also an estimate of heavy losses of about 30 per cent of the total of fruits and vegetables produced. (These are, of course, difficult to compare with foodgrains because vegetables and fruits are much more perishable - crops like the notorious onions, for example, will not keep in any conditions of moisture). But letting private trading companies hold at least some of the stores would provide an element of competiton that would spur the functioning of the FCI, and help in promoting efficiency and innovation. Estimates are that the cost of storing foodgrains is 50 per cent lower in the private sector.
Restructuring the PDS, however, should go a lot farther than tinkering with arrangements between public and private storage. At the very end of the whole chain, from farmer outwards through the merchants, the officials, the marketing committees, the godowns, the truckers, the retail shops, stands the consumer. Up to now the PDS has simply meant that the State provides a certain amount of specific goods - wheat, rice, sugar, oil or whatever - against the ration card. Why not give the consumer more choice in purchasing? Instead of directly providing the rations, why not give food coupons, worth a certain amount of money (with foodgrain prices calculated at ongoing market rates), but which the consumers can use to buy whatever food they want, when they want it. This would not only allow more choice, it would also give an advantage to local producers, who can save the cost of transport.
The rationing system was begun during World War II but the roots of the expansion of the vast system of the PDS and the associated bureaucracy of the FCI are in the Nehruvian command economy, in the faith that the royal road to development lay through State control and State responsibility.
Farmers were considered to be ignorant, unresponsive to price incentives; as the development economist, Mr. Sukhumoy Chakravarti, put it, the basic assumption behind the outlook towards agriculture in the early days of planning was that it could be the source of "cheap food, cheap raw materials and cheap labour" - the dispossessed rural people fleeing from drought and an unprofitable agriculture to the cities, ready to sell their labour power at low costs.
With all the rhetoric of "food security," cheap food was designed to help industry just as much, by keeping wage costs low. And, just as the State was considered the best bet for managing steel companies, so also it was thought it could replace private traders, the notorious banias, in distributing foodgrains.
This kind of development has now reached the end of its road. India has now reached the situation where - thanks to a large degree to its farmers and the much-maligned "green revolution" and some spread of irrigation - a minimal level of consumption has been reached. Though journalists sometimes may use hyperbole, it is no longer a "nation stalked by starvation". With an availability of around 540 grams of foodgrains a day and with the consumption of eggs, milk, fruit and vegetables also rising, some form of floor is still needed for consumption, to help the poorest. But the food distribution system designed for the days of poverty and statism needs to be restructured.